The threats associated with money laundering and terrorist financing are constantly evolving and so the legal framework must adapt and change to combat these activities. On the 16th February 2012, the financial Action Task Force (FATF) adopted a revised version of the international anti-money laundering (AML) standards. The Third Anti-Money Laundering Directive sets out a framework which is designed to protect the financial system against the risks of money laundering and terrorist financing and is based largely on the FATF recommendations. On the 11th April 2012 the Commission published a report reviewing the European framework and in particular the application of the Third Anti-Money Laundering Directive. The Commission plans to bring forward a proposal for a fourth money laundering Directive in Autumn 2012, and in particular to enhance the risk based approach to Anti Money Laundering (AML) compliance and supervision. The Parliament has set up a Special Committee on Organised Crime to investigate organised crime, corruption and money laundering in the European Union and to make recommendations to tackle these issues. The Committee began its work in April 2012.
This dossier presents a selection of key reports, analyses and opinions on money laundering in the European Union – up to date to April 2012.
Report on the application of Directive 2005/60/EC on the prevention o the use of the financial system for the purpose of money laundering and terrorist financing / European Commission April 2012 , 18p. This report analyses how the different elements of the existing framework have been applied and considers how the framework needs to be changed. The report concludes that although the existing framework works well and no substantial changes are needed, some modifications are required to adapt to the evolving threats posed. The Directive will need to be revised in order to update it in line with the revised FATF recommendations, and in particular to enhance the risk based approach to AML compliance and supervision. (see DG Internal Market Financial Crime).
Final Study on the Application of the Anti-Money Laundering Directive / European Commission, DG Internal Market & Services – Budget, Deloitte, December 2010, 337p
This review on the application of the AML Directive was carried out by Deloitte for the Commission as part of its review of the existing framework. It is an extensive report that examines the operation of the AML Directive, the impact of the AML Directive on specific sectors. It also provides analytical conclusions
International Standards on combating Money Laundering and the Financing of Terrorism and Proliferation / Financial Action Task Force Recommendations, February 2012, 126p
The cost of money laundering and underlying serious crime is estimated between 2 and 5% of global GDP. The revised Recommendation fully integrate counter-terrorist financing measures with anti-money laundering controls, introduce new measures to counter the financing of the proliferation of weapons of mass destruction, and they will better address the laundering of the proceeds of corruption and tax crime. They also strengthen the requirements for higher risk situations and allow countries to take a more targeted risk-based approach
Committee on Civil Liberties, Justice and Home Affairs – Own Initiative Report on Organised Crime / Sonia Alfano, European Parliament (2010/2309 (INI) ) 06/11/2011, 26p.
The aim of this report is to set out Parliament’s guidelines and proposals to counter organised crime at EU level. Proposals are made for action to improve the EU legislative framework. The report stresses the importance of strengthening European structures to combat organised crime together with strengthening relations with international institutions such as UNODOC and Interpol. The report also looks at policies the EU can frame with regard to organised crime including money laundering.
The following two reports published by the joint Committee of the three European Supervisory Authorities (European Banking Agency (EBA), European Securities and Markets Authority (ESMA) and European Insurance and Occupational Pensions Authority (EIOPA) 11th April 2012. Both reports conclude that there are significant differences in the implementation across the EU Member States, and that some of these differences could create undesirable effects on the common European AML
Report on the legal, regulatory and supervisory implementation across EU Member States in relation to Beneficial Owners Customer Due Diligence requirements, The report sought to identify differences in the implementation of the Third Money Laundering Directive and to determine whether such differences create a gap in the EU AML/CTF regime that could be exploited by criminals for money laundering and terrorist financing purposes, 27p
Report on the legal and regulatory provisions and supervisory expectations across EU Member States of Simplified Due Diligence requirements where the consumers are credit and financial institutions The report focuses exclusively on one particular situation of low risk where SDD is applicable, namely where the customer is a credit or financial institution in a EU/EEA state or in a country that imposes equivalent AML/CT requirements, 24p
Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFL) – Report on the Review of the effectiveness of the Program / International Monetary Fund Legal Department, 11th May 2011, 97p
This paper reviews how the IMF’s program has evolved over the last five years and discusses how the fund could move forward in this area, in particular taking a ‘risk focused approach’ and secondly the establishment of criteria to determine when AML/CFT issues may pose risks to the stability of a member’s domestic financial system or to external stability.
Money laundering in Europe / Tavers, Cynthia ; Thomas, Geoffrey ; Roudaut, Mickaël, Eurostat Methodologies and Working papers, DG Home Affairs, November 2010, 92p
This Eurostat report prepared by Eurostat and DG Home Affairs presents an overview of the developments in combating money laundering in the EU with links within the document to key legislative and non legislative material on the topic. It provides statistics on money laundering in Europe. The goals of the report are fourfold; 1) to clearly identify obstacles to comparing data between Member States, 2) to bring more clarity and transparency to the issue of money laundering, 3) to encourage Member States to improve their statistical expertise by collecting data more rigorously, and finally 4) to encourage Member States to develop a cost/benefit analysis of their anti-money laundering scheme
An overview of European and international legislation on terrorist financing / EP DG IPOL, Policy Department C, Citizen’s Rights Affairs and Constitutional Affairs, April 2009, 64 p.
A study that examines the definitions and scope of activities linked to terrorist financing as well as the regulations that should prevent it and the cooperation between competent authorities within the EU.
International Narcotics Control Strategy Report (INCSR) 2012
A global assessment of illicit drug-control and money laundering activities in more than 140 countries. Released by the Bureau for International Narcotics and Law Enforcement Affairs, U.S. Department of State, Washington, DC, 01 March 2012. Part I covers drug and chemical control activities. Part II covers money laundering and financial crimes.
Promise and Perils: the Making of Global Money Laundering, Terrorist Finance Norms / Michelle Gallant, J.M.L.C., 13(3), 2010 p. 175 – 183.
This paper discusses the history and development of anti-money laundering norms from organisations such as the FAFT and the UNSC. The positives and negatives of the four main contributors to norms development are analysed. The similarities between conventions and FAFT and UNSC soft law are discussed. The effect of global politics on developing money laundering guidelines is also considered. For example, the guidelines or norms tend to be the lowest common denominator which the countries can agree on, and are perhaps not as robust as some countries or interested parties would like. However the FATF compliance mechanism converts the soft law norms and standards to some extent into hard law. This is done through a process of individual state evaluation which is followed by recommendations which have proven to be powerfully persuasive.
The Institutional Framework Against Money Laundering and its Underlying Predicate crimes / Norman Mugarura, J.F.R. & C. 19(2), 2011, p174- 194.
This article discusses the adequacy of the current framework against money laundering. The paper is primarily based on the provisions of the UN Convention on transnational organised crimes and the protocols adopted in Palermo (2000) and the FATF (2004). The paper discusses the importance of global AML schemes, as transnational money laundering groups cannot be stopped by one country alone. The type of law is discussed, as well as its enforceability given that it is soft law. For example enforcement methods such as peer evaluation of its 40 recommendations as carried out by the FATF. Also in 2000 the FATF published a list of all of its non-cooperative countries. Foreign direct investment is also discussed as an enforcement mechanism, as a strong legal system is necessary to attract such investment.
Recovering the Proceeds of Corruption: UNCAC and Anti- Money Laundering Standards / Indira Carr and Miriam Goldby, J.B.L., 2, 2011, p. 170-193.
This paper compares different anti-money laundering regimes with the United Nations Convention against Corruption 2003 (UNCAC). The paper discusses the importance of cross-border co-operation between countries, as more and more often money laundering has a cross border dimension. The difficulties arising out of transnational money laundering such as jurisdictional issues are examined. The article advocates for an international framework whereby foreign states may get access to evidence of assets involved in corruption and money laundering, and can then be can be frozen in court proceedings. Greater information exchange between the FIUs is necessary according to the writer. The limitations of AML regimes are also considered.
A New Role for Non Profit Actors? The Case of Anti-Money Laundering and Risk Management / Bergström, Helgesson, Mörth, Journal of Common Market Studies, V. 49, No 5, 2011, p. 1043–1064.
This article compares the role of private actors in anti-money laundering in terms of the risk based approach. The UK and the Sweden are compared in this context. Both countries implement the risk based approach. The risk-based approach ensures that competent authorities and financial institutions can implement measures to prevent or mitigate money laundering and terrorist financing which are commensurate to the risks identified. This enables resources to be allocated most efficiently. The belief is that resources should be allocated in accordance with the institutions priorities so that the greatest risks are given the highest attention. The alternative approach is that resources are either applied uniformly, so that all financial institutions and customers receive equal attention, or that resources are targeted but based on factors other than risk. This can lead to a ‘tick box’ approach, i.e. meeting regulatory needs rather than actually combating money laundering.
The concept of money laundering in global economy / Radulescu Dragos Lucian, International Journal of Trade, Economics and Finance, Vol. 1, No. 4, December 2010, 7p
This article provides an overview of the money laundering process, the international associations involved in combating money laundering globally and the challenges posed by increased globalisation, sophisticated technological means and the exploitation of free borders. It also looks at Romanian domestic legislation to combat money laundering.
Fighting Financial Crime in the Age of Electronic Money: Opportunities and Limitations / Giorgio Merlonghi, J.M.L.C. 13(3), 2010, p. 202 – 214.
The article argues for prevention rather than repression of money laundering crimes. Prevention is advocated in the form of better surveillance. Especially now that electronic money is more popular, online surveillance is increasingly more important. The article sets out the different sophisticated ways in which money launderers can hide the money trail online. The author advocates that preventative measures and focusing on the causes and process would be better than direct reaction to individual incidents of illegality. A systematic approach rather than a case by case approach is favoured.
How mafias take advantage of globalization: the Russian mafia in Italy / Federico Varese, Brit. J. Criminol. 2012, 52(2), 235-253.
This article is a case study on an Italian undercover police investigation of the Solntsevskaya cell in Rome, which lasted three years. Transcripts of telephone conversations between the Russian and Italian criminals involved were attained. International money transfers and financial operations involving banks in Budapest, Vienna, London, New York and Rome, and property speculations in Italy are discussed. The information gathered implicated several members of parliament in both Italy and Russia, members of the armed forces and embassy officials. This article highlights the fact that funds that were channelled out of the country illegally may be repatriated for a small fee.
Anti money Laundering in Turkey: An example of Convergence / Osman Yukselturk, Journal of Money Laundering Control, 14(3), 2011, 279-296.
This is a comparative paper which compares the anti-money laundering approaches of Turkey to that of the EU. Compliance, sanction and reporting obligations are discussed as well as the convergence of Turkish and EU policies.
Reluctant Partners?: Banks in the Fight Against Money Laundering and Terrorism Financing in France / Favavarel- Garrigues, Godefroy and Lascoumes, Sage Publications, Security Dialogue, 42(2), 2011, p. 179 -196
This article discuses the implementation of anti-money laundering/counter-terrorism financing within the private sector in France. This article highlights the growing importance of professionals such as banking officials in intelligence collection on money laundering and terrorism activities. Bank officials in France are now integrated into the anti-money laundering policy.
Wives, Girlfriends and Money Laundering / Melvin R.J. Soudijn, J.M.L.C., 13(4), 2010, p. 405 – 416.
This paper sets out how wives and girlfriends have and will be held liable for complicity in money laundering and criminal activity in The Netherlands. The article illustrates that women can be actively involved in money laundering activities. 60 of the 65 wives which were analysed for this study had knowledge that they were taking part in criminal activity. There is nonetheless a low prosecution rate. Only 25 of the women in this study were actually charged with 35 evading liability.